Investing.com -- The U.S. Dollar Index fell sharply on Thursday to Brexit lows from late-June, as foreign exchange traders parsed the minutes of recent meetings from the Federal Reserve and the European Central Bank for signs of potential divergence between the major central banks.
The Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.6% to an intraday low of 94.05 on Thursday, its lowest level since June 24. The index is on pace for its fifth consecutive losing session. Since hitting four-month highs in late-July, the U.S. Dollar has plummeted approximately 3.50% versus its main rivals over the last three weeks. More broadly, the index has fallen by nearly 5% year-to-date.
Investors continued to react to opaque minutes from the Federal Open Market Committee's (FOMC) July meeting, which provided few signals on whether the U.S. central bank could raise short-term interest rates before the end of the year. While some participants felt that economic conditions would soon warrant "taking another step in removing policy accommodation," at the two-day meeting on July 26-27, others judged that it would be appropriate to wait for further incoming data on the U.S. price stability as long-term inflation continues to hover below the Fed's targeted goal of 2%. Earlier this week, New York Fed president William Dudley said the timing could be right for additional tightening from the Fed, while leaving a potential September rate hike on the table.
Any rate hikes by the Fed this year are viewed as bullish for the dollar as foreign investors pile into the greenback in order to capitalize on higher yields.
Meanwhile, on Thursday morning the European Central Bank released the minutes from the Governing Council's July meeting, its first since the U.K. shocked markets with a surprising decision to leave the European Union in late-June. At the meeting, policymakers discussed steps to "contain the political uncertainty" surrounding the Brexit negotiations and "provide a clear vision," for the future path of the European Union, according to the minutes. While underscoring that the Brexit referendum provided a headwind to financial markets, the Governing Council left its benchmark interest rate unchanged at zero in July for the fourth straight month.
"It was widely felt among members that it was premature to discuss any possible monetary policy reaction at this stage," the minutes showed. "More time was needed to assess the incoming information over the coming months, although downside risks had clearly increased."
Elsewhere, there were 262,000 initial unemployment claims in the U.S. last week, a decline of 4,000 from the previous week. It marked the 76th consecutive week new jobless claims fell under 300,000, representing the first time of such an occurrence in 43 years.
EUR/USD soared by more than 0.55% to 1.1366 returning near pre-Brexit levels, while GBP/USD jumped nearly 1% to an intraday high of 1.3173, completing one of its strongest one-day rallies since voters in the U.K. decided to leave the European Union on June 24.
USD/JPY lost more than 0.3% to 99.95, remaining near one-year lows. After dropping below JPY 100 against the Yen for the second time in three sessions, the U.S. Dollar is on pace for its fifth consecutive loss against the Japanese currency. The level is considered to be a key psychological barrier. Earlier this week, Japan vice finance minister for International Affairs Masatsugu Asakawa cautioned that the Ministry of Finance and Bank of Japan could intervene in foreign exchange markets if sharp fluctuations in the Yen ensue.
Yields on the U.S. 10-Year fell one basis point to 1.54%. Over the last year, government bond yields on 10-year U.S. Treasury notes have plunged by more than 65 basis points.